Published on: October 3, 2022
I had a chance last week to make my first visit to Porto's Bakery, a California retailer started by a a family of Cuban immigrants that has grown to six stores. Porto's continues to create the kind of food-centric magic that invites people to actually wait on line to go inside where they have to wait on line.
Published on: October 3, 2022
The Wall Street Journal this morning reports that in the post-pandemic world, as consumers wrestle with inflated food prices and the prospect of recession, one thing that shoppers are not finding are the discounts and sales that used to typify the supermarket shopping experience.
"With food inflation running at the highest rate in more than 40 years, American shoppers are finding less relief from deals like 'buy one, get one free' promotions, or 99-cent two-liter bottles of soda, according to supermarket executives and analysts," the Journal writes. "The frequency and depth of U.S. grocery-store discounts remain below 2019 levels, according to retailers, prompting grocers to run sales on less popular items, or lose money offering discounts on staple products proven to bring in shoppers.
"On average, 20.6% of food and beverage products were sold with price reductions in the third quarter of this year, according to research firm Information Resources Inc., down from 25.7% for the same period in 2019. Promotional levels are down from 2019 levels for all grocery categories except for meat, data show.
"Food makers, which typically provide funding to supermarkets to support discounts and special sales, said ongoing shortages and supply-chain problems are limiting their production and leaving fewer products available to be put on sale. Supermarket companies, already paying higher wholesale prices to keep their shelves stocked, are left to spend more of their own money to advertise and support discount deals, executives said."
There is an argument that the elimination of many promotions, which encourage retailers to make money on the buy instead of on the sell, actually is a good thing for the industry. products will be carried because customers want them or because retailers believe that they will add to their mix, not just because there are promotion dollars supporting them.
That said, one-fifth of products being sold with price reductions - down from one-quarter a couple of years ago - may be a decline, but it still is a lot. So we have to be careful not to overstate the trend.
Published on: October 3, 2022
From the Wall Street Journal:
"A persistent economic puzzle is why labor is still so tight amid slowing growth, high inflation and growing fears of recession.
"Gross domestic product growth slipped into negative territory in the first half of the year. Borrowing costs have risen steeply as the Federal Reserve boosts interest rates in an attempt to reduce inflation. Even so, monthly payrolls have grown an average of 438,000 from January through August, nearly three times their 2019 prepandemic pace.
Many employers say they continue to struggle with large staffing shortages that built up during the pandemic and are reluctant to cut head count. In many cases, they are still hiring."
According to the story, "Some economists say the scars of the past year’s shortages—including the huge expenses of hiring and recruiting, combined with high employee turnover—could leave companies more hesitant to lay off workers if the economy falls into a mild recession. They contend that companies never fully met their hiring needs during the recovery and that businesses will likely pull openings, which are at historic highs, before they resort to cutting jobs."
It is a fascinating challenge - as so much of the economy seem negative, employment seems immune to the trend.
I'd like to think that the whole notion of being essential has managed to gain some extended traction in the business, that retailers understand better the roles they play in their communities, and the roles that invested employees play in those relationships.
There will be an instinct to down-size whenever and wherever possible … but maybe "right-size," in a way that is consistent with strategy and tactics, with brand equity and a store's value proposition, ought to be the preferred term of art.
Published on: October 3, 2022
Content Guy's Note: When it was reported that Richard Niemann Sr. had passed away last week, I asked Michael Sansolo - who, as a longtime senior vice president at the Food Marketing Institute (FMI), spent considerable time working with Niemann - to offer some thoughts…
Richard Niemann Sr., who over a 50-year career grew his family’s company from a small operation in Quincy, IL, into a formidable regional chain of 130 stores, passed away last week.
Niemann’s story is, in many ways, so typical of many family businesses over past decades. As a grade schooler he was introduced to the business by his father and by age 12 began working at Niemann Brothers Wholesale Grocers. In his late 30s, he and his brother Ferd took over the business after the death of their father, and Rich ran it until passing the leadership onto his sons, Rich Jr. and Chris. Today the company operates stores in five states and in formats as different as limited assortment stores, full-line supermarkets, price-oriented stores, pet supply stores, hardware stores and even coffee and pizza restaurants.
I had the wonderful opportunity to work with Rich and to be friends with him and his wife, Connie, during my years at FMI. Without exaggeration I can say that while he was a hard-charging businessman, he was also one of the nicest people you could ever encounter, always ready to greet you with a broad smile and an offer to help on any project.
Rich was involved in many FMI committees and was an incredibly active participant in the association’s lobbying efforts through fund-raising and personal visits with governmental officials. In recognition of his service, the association awarded him its highest honors for industry support. Unsurprisingly, Rich was also extremely active in (and repeatedly honored by) many local charities and business associations in Quincy and throughout Illinois.
Published on: October 3, 2022
Business Insider reports that Rite Aid "is struggling against increased theft at its New York City stores that executives say cost the pharmacy chain $5 million in losses during its most recent quarter … In a call with investors Thursday, executives said the company is testing new security efforts to prevent theft in high-crime areas. Arnaud Persaud, Rite Aid's chief revenue officer, said this may mean vastly increasing the amount of products behind lock-and-key displays."
Rite Aid CEO Heyward Donigan characterized the problem as "unexpected headwinds … from front-end shrink."
The story says that "according to data from the New York Police Department, rates of petty theft in the city have increased 42% this year compared to 2021. There also was an uptick in robbery and burglary, at increases of 37% and 32%, respectively."
Business Insider notes that there was one Rite Aid location in Manhattan's Hell's Kitchen neighborhood that "reported $200,000 in stolen merchandise over a two-month period alone," and was forced to close earlier this year. However, Persaud says the company's goal is not to close stores, but rather "improve methods to halt theft in order to continue serving communities."
Published on: October 3, 2022
FMI-The Food Industry Association is out with its second installment of the 2022 Power of Private Brands report, which "surveys food retailers and manufacturers about their private brands growth strategies." Among the findings:
• "Retailers report having strong goals over the next two years for their private brand portfolio, with a current average dollar share of 18.2% and an ambitious goal of 22.6% in the next two years."
• "Eighty-one percent of food retailers and manufacturers surveyed report innovation as the top strategy for achieving higher private brands market share. Specifically, industry respondents see potential for private brands premium products (69%), product options with simple ingredient lists (60%), products offering strong price/value in a category (56%), and prepared meal solutions (42%)."
• "Food retailers and manufacturers surveyed report a wide range of strategies to accelerate private brands growth. The majority (71%) plan on working with suppliers to optimize price and availability, which aligns with consumers mostly choosing private brands because of lower costs, deals or perception of good value. Other top acceleration strategies mentioned include improving consumer insights and trends intelligence (64%), launching new products (64%) and improving packaging (58%)."
• "Food retailers and manufacturers surveyed report a wide range of strategies to accelerate private brands growth. The majority (71%) plan on working with suppliers to optimize price and availability, which aligns with consumers mostly choosing private brands because of lower costs, deals or perception of good value. Other top acceleration strategies mentioned include improving consumer insights and trends intelligence (64%), launching new products (64%) and improving packaging (58%)."
Published on: October 3, 2022
• From the Financial Times:
"TikTok is launching live shopping in North America and plans to outsource its operation after the social media platform’s experiments with ecommerce in the UK struggled to take off. Los Angeles-based TalkShopLive is due to enter a partnership with TikTok on bringing TikTok Shop to the US. It will provide the underlying technology and support for live streams hosted by influencers, brands and retailers that want to sell their products on the app, said two people familiar with the operations."
FT notes that "the developments come as TikTok faces heightened scrutiny in the US, where politicians have raised fears that American user data is accessible by Beijing, given the platform’s Chinese owners ByteDance — concerns it denies. The Biden administration is reviewing efforts by former president Donald Trump to ban the company on national security grounds. TikTok is also working with the government on new data security practices to secure US user data."
TikTok Shop, the story says, "which allows users to buy products through links on the screen of the app during live broadcasts, was launched in the UK last year, its first market outside of Asia. It is available in Thailand, Malaysia, Vietnam, Singapore, the Philippines and Indonesia. The model has proved lucrative for TikTok’s sister app in China, Douyin, which has seen sales more than triple year on year in the 12 months to May."
I think we have to be very careful about allowing a Chinese government-controlled entity to be in a position where it can be gathering data about American citizens and consumers. At this moment in history, that strikes me as being problematic.
Published on: October 3, 2022
With brief, occasional, italicized and sometimes gratuitous commentary…
• Publix announced that it "is donating a total of $1 million to nonprofit organizations, including the American Red Cross and United Way, supporting relief efforts in areas affected by Hurricane Ian.
"In addition, on Sept. 30, Publix is activating a companywide donation campaign, allowing customers and associates to help people affected by the hurricane. Donations may be made in any amount at checkout. One hundred percent of donated funds will go to the American Red Cross, enabling them to respond to and help people recover from this disaster. The end date for the campaign will be determined based on customer response."
The degree of devastation in Florida is extraordinary, and, as usual, retailers such as Publix have stepped up to serve their communities - going above and beyond wherever and whenever possible.
• From the Wall Street Journal:
"Household spending rose by a solid 0.4% in August after dropping a revised 0.2% in July, the Commerce Department said Friday. The August increase was just 0.1% after accounting for inflation. The higher spending came amid signs that inflation, already close to a four-decade high, has become increasingly entrenched in the U.S. economy despite the Federal Reserve’s aggressive moves to tighten monetary policy.
"The personal-consumption expenditures price index rose 6.2% year-over-year in August, down from a 6.4% in July, according to Friday’s report. On a monthly basis the index rose 0.3%, up from a 0.1% decline the prior month."
• Reuters reports that Kroger plans to terminate its agreement with Cigna Corp.’s subsidiary Express Scripts, saying that the company has an "unsustainable pricing model."
According to the story, "Kroger said it has made several attempts since February to negotiate with the pharmacy benefit manager for a 'more equitable and fair contract that lowers cost, increases access, and delivers greater transparency, but there has been little to no progress to date.'
"Kroger said more than 90% of Kroger Health’s customers will not be affected by a termination of the deal, but if a new agreement is not reached by Dec. 31, most Express Scripts’ commercial customers won’t be able to fill prescriptions at Kroger stores."
• NJ.com reports that the New Jersey legislature will consider bills that will force Costco to sell gasoline to anyone who pulls up to its pumps, not just its card-carrying members.
According to the story, the legislation, if passed, "would require retail membership clubs in the Garden State to permit anyone to purchase gasoline at their pumps, not just paid members. The measures don’t mention Costco by name, but this comes three months after the company switched to restricting sales of their often-cheaper gas in New Jersey to those with membership cards. For years, everyone had been allowed to fill up there."
Some context from the story:
"In 2004, Costco tried to limit gas to members only but was told by the state that it violated New Jersey fuel laws.
"In June, however, state officials said there are no consumer laws that would forbid Costco’s members-only policy this time. A state Treasury Department spokeswoman said it has no restriction on gas sales, as long as motor fuels taxes are paid.
"A basic Costco membership is $60 and includes access to gas stations at the stores.
The new bills argue that limiting gas to members harms 'the public interest' by decreasing the number of available gas stations."
• The Wall Street Journal reports that "McDonald’s Corp., Starbucks Corp., Chipotle Mexican Grill Inc. and other big restaurant chains are joining to spend millions of dollars to try to overturn a new California law that could set the state’s minimum wage for the fast food industry as high as $22 an hour next year.
"The 'Save Local Restaurants' coalition said Friday it has raised around $12.7 million to fight the law, known as the FAST Recovery Act. Corporate brands have contributed $9.9 million and individual franchisees have given $2 million, including owners of KFC and McDonald’s restaurants. Trade associations account for the rest, the coalition said.
"The coalition wants to postpone the implementation of the law, set to begin Jan. 1, and let voters decide through the state’s referendum process whether to permanently block the law in 2024. Opponents need to collect hundreds of thousands of signatures for the referendum to take place, and to put implementation of the law on hold until the vote is held."
• In the UK, the Daily Mail reports that "Tesco is speeding up its promise to cut food waste in half – bringing its target forward by five years to 2025. And in a first for a big retailer, store bosses must now meet targets to cut food waste or miss out on performance-related bonuses.
"For top executives, hitting these targets are worth tens of thousands of pounds or more in Tesco shares."
Published on: October 3, 2022
• Stater Bros. Markets announced that its president, Greg McNiff, is adding COO to his title, and will lead the company’s Marketing, Retail, and Distribution Departments and report to CEO Pete Van Helden.
McNiff is a former division president at Albertson’s Portland Division, and joined Stater Bros. Markets as president in 2019.
Published on: October 3, 2022
• Dan Wieden, the Portland-Oregon-based advertising executive whose firm, Wieden + Kennedy, was one of the most influential agencies in the business, coming up with memorable, often offbeat campaigns that captured the zeitgeist in a phrase or image, has passed away at age 77.
When Wieden and David Kennedy founded their agency in 1982, they had just one client - Nike. And it was Wieden who coined the slogan, "Just Do It."
Willamette Week writes that Wieden "presided over an office culture in Northwest Portland that became famous for luring the most creative young people in America to sell Coca-Cola and Levi’s jeans. In 2009, WW listed the attractions: 'regular afternoon rock concerts, an indoor basketball court-cum-yoga studio, an espresso shop, free Cokes in the machines, napping rooms, an annual pie-baking contest, legendarily mood-altered parties, stacks of special-edition Nike high-tops wheeled through the halls.' On the annual Founder’s Day party each April 1, Wieden+Kennedy’s 400 employees simultaneously downed a shot of ouzo.
"By that time, the agency had offices in New York, Tokyo and London, and reported more than $1 billion in annual billings."
The story notes that on the company's 10-year anniversary, Wieden said to his assembled employees, "I think you people just needed somebody to get the f- out of your way.”
In a statement over the weekend, the agency released the following statement:
"“We are heartbroken. But even more so, we are overcome with gratitude and love. Thank you Dan, for throwing the doors wide open for people to live up to their full potential. Thank you for your steadfastness, courage, faith and abiding love. Thank you for making this beautiful creative life possible. We will miss you so much."
Published on: October 3, 2022
Got the following email from an MNB reader responding to Michael Sansolo's column last week about classical music groups playing a popular repertoire as a way of expanding Appeal:
Last Saturday evening my wife, a friend and I went to a candlelight concert in Chicago at a nearby Episcopal church - Taylor Swift songs played by string quartet. Two shows that evening, each about 75 minutes. Packed house for each and audience was much younger than church membership and 90% women.
Fun evening and we are looking for other shows they will be putting on in Chicago area.
If you want to grow your customer base, that's how you do it.
Reacting to my piece last week about the suburban Amazon Go format in Whittier, California, MNB reader Monte Stowell wrote:
You have to face the facts. Amazon is not a grocery company that is going to revolutionize how people shop. In my book, it is a smaller version of a 7-11, etc., except the 7-11 has a lot more SKUs versus what Amazon has to offer. Just because the store in the article is an Amazon, frankly, who cares. It is just another format that does not offer anything that gives the consumer a Wow factor. A work in progress?
As I think I said last week, this format strikes me as a store that has not quite figured out what it is yet … but I think it would be a mistake to assume that Amazon cannot or will not figure it out and become a real force in grocery shopping.
Plus, you miss the "wow factor" that this store offers - frictionless, checkout-free shopping. To me, this is the essence of the revolution.
Another MNB reader wrote:
Based on your pictures and description, along with one visit to an Amazon Go store with the urban format, I’m still seeing Amazon with an answer. The challenge is finding the problem for it to solve.
Now certainly eliminating the friction point of checkout is going to be the value proposition. I get that point. But what I’m seeing in your pictures as well as my experience is that Amazon Go is not a place where I’m interesting in doing a significant amount of my shopping. If one were by me it would be a convenience; like going to a C-store. The challenge there is that convenience stores typically are a fast experience at the checkout (and if that is not the case I’m not going back because that *is* the convenience).
Until Amazon finds the formula where I’m looking to do a higher percentage of my weekly basket there, I don’t see it getting over the hump. Will they keep plugging away until they do? I have to say the answer is yes. But as you noted, there is still more discovery on their end.
I also got this nice note from an MNB reader about my travels last week:
If you only attended conferences/workshops but continued visiting area stores, you’ve got a great format for all of us to keep informed. I appreciate it.
My pleasure. And more to come this week.
Just FYI … speaking at conferences and visiting stores to share them with MNB readers is among the greatest pleasures of my job.
And finally, I posted this picture last week and asked MNB readers to guess where I was:
Extra credit to the readers who got it right - I was at Good Stuff in hermosa Beach, California, enjoying a delicious breakfast of avocado toast (served with chopped tomatoes, feta cheese and crushed red pepper) and coffee …
Published on: October 3, 2022
In Week Four of National Football League play…
Miami Dolphins 15, Cincinnati Bengals 27
Minnesota Vikings 28, New Orleans Saints 25
Seattle Seahawks 48, Detroit Lions 45
New York Jets 24, Pittsburgh Steelers 20 (not a typo)
Chicago Bears 12, New York Giants 20
Tennessee Titans 24, Indianapolis Colts 17
Los Angeles Chargers 34, Houston Texans 24
Cleveland Browns 20, Atlanta Falcons 23
Washington Commanders 10, Dallas Cowboys 25
Jacksonville Jaguars 21, Philadelphia Eagles 29
Buffalo Bills 23, Baltimore Ravens 20
Arizona Cardinals 26, Carolina Panthers 16
Denver Broncos 23, Las Vegas Raiders 32
New England Patriots 24, Green Bay Packers 27
Kansas City Chiefs 41, Tampa Bay Buccaneers 31
